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Optimising Pakistan’s dairy industry

Optimising Pakistan’s dairy industry

The livestock sector plays a key role in the economy of Pakistan. In 2022-23, the sector grew at 3.78 % and contributed 62.68% to agriculture and 14.36% to the Gross Domestic Product (GDP). Despite the sizeable number of cows and buffaloes, the country imports milk, and milk-based products to meet local demand. In Pakistan, more than 90% of the milk is consumed as fresh and a smaller percentage is processed. The dairy sector is important not only for the socioeconomic development of the country but also for fulfilling the nutritional needs of the population.

Pakistan’s dairy industry has huge growth potential which is yet untapped due to various constraints. Some of these include low productivity, high costs of feed and fodder, low genetic potential of breeds, and a lack of research and development. Above all, milk production is dominated by small dairy farmers who are resource-constrained and lack financing, storage, and transportation facilities. This makes milk collection from distant areas a challenging logistics problem that is well-known in rural areas around the world. The milk perishability and traveling short distances for milk collection further aggravate the problem. This problem has generated special interest in finding ways to develop milk collection networks.

A milk collection network comprises several milk collection centers spread across milk production areas, their surroundings, and processing facilities. On a daily and seasonal basis, the amount of milk collected at these centers varies. Each day, the vehicles bring milk to the designated dispatch sites from the milk collection facilities. Each milk collection facility must have all its milk collected. Milk collection from many small farmers dispersed across a big geographical area is particularly a challenge. Owing to this reason, large dairy processors set up milk collection centers (MCCs) in areas where several hundred liters of milk are available. Since milk is a perishable commodity, it needs to be handled carefully. Therefore, milk collected at the MCCs is cooled. Except for a few milking locations near the plant, this milk is transported to chilling facilities or dispatch locations where it is refrigerated again. It must be delivered to the dispatch center within a certain amount of time. To reduce transportation expenses, the milk is transported on large vehicles to the processing plants.

In Pakistan, the traditional milk collection networks involve several intermediaries. Milkmen collect milk from farmers in rural areas and then transport it to retailers for selling to consumers. The intermediaries use traditional practices, transport, and technology for milk collection, storage, and transport which raises several milk quality and safety issues. As a result, consumers are not satisfied with milk quality and purity. In recent years, the milk processing industry has started growing with the entry of various national and international companies with resources and modern technology. These companies have established their farms and networks for milk collection from surrounding areas. They provide various services to farmers and use modern technologies, cool chains, and transportation facilities.

The public and private sectors have taken various initiatives to improve the milk collection. Some of these include the establishment of the Nestle Pakistan Dairy Cooperative Society (NPDCS), Pakistan Dairy Development Company (PDDC), Anhaar Milk Producers Cooperative Society, Engro Foods Dairy Farmers Cooperative Society, Livestock and Dairy Development Board (LDDB) and Pakistan Dairy Association (PDA). These establishments have significantly contributed to the development of the dairy industry and are a driving force in improving the lives of dairy farmers. They collaborate closely with dairy farmers to increase milk production and quality and streamline marketing efforts. For this purpose, they provide their members with training, veterinary services, and access to high-quality dairy inputs and ensure fair marketing opportunities.

Most of the dairy farms in Pakistan are smallholdings practicing subsistence farming. Their marketable surplus is often too small. Various socio-economic constraints hinder their market access. Not only do these cause milk wastage but also negatively impact the economic and social well-being of farmers and the health of animals. There is a need to link small dairy farmers with milk collection networks either through large farmers or promoting cooperatives.

In Pakistan, many large farms have better financial investment. They have developed collaborative relationships with large processing firms that provide them with training and other services and good returns for their good quality milk. These farmers have installed chilling and other basic facilities at their farms for milk storage. Due to their greater volume of milk, the processing firms collect milk from their farms. These large farmers can play an important role in milk collection networks. They can be urged to engage small farmers in their surroundings to supply their marketable surplus. Their farms can serve as a milk collection point for onward supply to milk processing industries. They can charge some amount from small farmers for their labor, chilling, storage, and testing facilities. This arrangement can provide market and good returns to small farmers and also increase milk supplies in the county.

The increase in milk production depends on financial resources and technologies but also on the institutions that manage the use of modern practices and technologies. Cooperatives are an example of such rural or agricultural institutions. They are enterprise models based on the concept of economic as well as social needs of their members. Their members pool their resources in certain areas of activity for mutual economic benefit. Cooperatives are successfully operating in many developing and developed countries including the United States of America, Canada, Australia, European countries, and China. In Indonesia, India, and Bangladesh, they have played a significant role in attaining sectoral growth, increasing farmers’ earnings and food self-sufficiency.

The agricultural cooperatives can make an important contribution to the economic development and food security in Pakistan. There is a need to establish dairy cooperatives to cope with the issues of dairy farmers. In some areas, dairy cooperatives have played a significant role in Pakistan’s dairy industry. These cooperatives are formed by dairy farmers who join to collectively manage various aspects of dairy production, processing, and marketing. Establishing effective milk cooperative models in Pakistan can greatly benefit dairy farmers by providing them with collective strength, access to resources, and improved market opportunities. In this respect, the following guidelines are proposed.

Cooperatives can be formed at different levels i.e., village, tehsil, district, province, and country. However, there is a need to promote community-based dairy cooperatives at the village or community level in Pakistan. Gradually, they can be elevated to further levels. To this end, there is a need to mobilize the dairy farmers to become members and jointly manage the cooperative. Related public sector institutions such as cooperative and extension departments and non-governmental organizations can play a key role in motivating and training farmers to become effective members of these cooperative organizations.

The success of cooperatives heavily relies on how they are governed. Often, few individuals and groups dominate the governance of the cooperatives and reap most of the benefits. The governing body of the cooperatives should be democratically elected and include only those members who are dedicated and committed to serving the community’s needs. They should have regular meetings of the general body of the cooperatives and maintain records of all activities and financial transactions. The surplus generated should be distributed among the members or reinvested with the approval of the management of the cooperatives. The principle of ‘one member-one vote’ should be strictly followed.

Dairy farmers have an important role in supply chain optimization. This can be done by immediately collecting the raw milk at the collection center of their village.

The collection agent should take the sample from each farmer and conduct basic quality tests to check. The accepted milk should be poured into a chiller at an appropriate temperature. The cooperatives should have their fund for the payment of labor, rent, and utility expenses. They can generate this fund by charging fees (one to two rupees) on every liter of milk marketed. The collected funds should only be spent on running the cooperatives and the welfare of their members. Strict monitoring and accountability mechanisms should be put in place to assess the performance and sustainability of cooperatives. All stakeholders should be made accountable for their roles and responsibilities.

Small dairy farmers are particularly resource-constrained and need support. Dairy cooperatives, particularly those managed by small farmers, should be facilitated in arranging the requisite infrastructure including the chiller and storage facility where members can pool their milk. They can be provided with short-term loans from their surplus funds which can be adjusted against the future milk contribution of farmers. The cooperatives can also lend milk to member farmers whose animals go out of the milk production cycle. Collectively, they can market their products efficiently locally and in nearby towns. Linking these cooperatives with the milk processing industry is very important for gaining better prices for good quality milk. This can also help in improving their dairy farming practices, animal health, and quality management to improve milk yields and product quality. This will provide opportunities to learn about new technologies and integrate them into their practices.

The dairy sector also has environmental sustainability concerns. Inadequate waste management can generate greenhouse gases (GHG) which cause climate change. GHG emissions rise with an increase in dairy herd and milk production. To reduce this impact, there is a need to train dairy farmers in sustainable farming practices. The related public sector institutions and the dairy industry should build the capacity of farmers.

In conclusion, the establishment and management of milk collection networks and cooperatives are very important for the dairy sector development of Pakistan. There is a dire need to link a large number of small dairy farmers with milk collection networks driven by large farmers, the dairy industry, and cooperatives. This approach can help in improving the dairy industry of the country as well as the welfare of the dairy farming community, particularly the large number of small farmers.

Dr. Hammad Badar – Associate Professor, Institute of Business Management Sciences, University of Agriculture, Faisalabad

Dr. Muhammad Khalid Bashir – Associate Professor, Institute of Agricultural and Resource Economics, University of Agriculture, Faisalabad

Dr. Khalid Mushtaq – Professor/Director, Institute of Agricultural and Resource Economics, University of Agriculture, Faisalabad

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